EURODAD recently held a roundtable in the European Parliament on 21st November to launch its new report “Exposing the lost billions. How financial transparency by multinationals on a country-by-country basis can aid development.” This report explains why under current accounting regulations it is so easy for multinational companies to dodge taxes and proposes full country-by-country reporting as a key solution. Current accounting rules effectively allow companies to hide the fact that they are exporting their profits to subsidiaries in tax havens. This is especially harmful for developing countries which are less well equipped to spot abuse. However these practices are having a devastating effect in Europe as well. During the discussion Ana Gomes MEP emphasised the importance of this in her country Portugal, struggling with a budget crisis and austerity, she stated that only one of the twenty largest listed companies was not using tax havens. Richard Murphy highlighted how critical this problem is for Europe citing his new research for the Tax Justice Network, which estimates tax evasion in 145 countries, he said that if Italy had been able to prevent tax evasion at this level for the last decade, its current sovereign debt would be wiped out.

The European parliament is about to consider a Commission proposal for country-by-country reporting of companies’ payments to governments in the extractive and forestry sectors. Nadia Galvino, Deputy Director for DG MARKT discussed the proposal her department had drafted, stating it will be immensely useful to tackle corruption and pointing out that it goes further than the comparable US legislation, known as Dodd-Frank, by including forestry and also large non-listed companies. The Deputy Director said that the Commission did not feel it was politically possible to propose the kind of full country-by-country reporting outlined in the report. She added that tax evasion issues would be addressed by the existing OECD standards. She also pointed at the EC tax commission’s recent proposal for a Common Consolidated Corporate Tax Base (CCCBT) issues like transfer mispricing. However the OECD standards have regularly proved ineffective or unworkable on transfer pricing and on tax information exchange. The EC’s CCCBT proposal has potential but is undermined by its voluntary status, meaning member states can opt out and companies select the most advantageous option out of the EU standard and domestic regimes. CCCBT would be far more effective if introduced in tandem with country-by-country reporting, not least because this disclosure would provide a picture of companies’ transactions with countries outside the EU which wouldn’t be covered by CCCBT.

EURODAD and CSOs in Europe call on the European parliament to strengthen the Commission’s proposal for country-by-country, that will be debated in the next months, adding financial performance information needed to tackle tax dodging and apply this full country-by-country reporting to all sectors. Parliament has called for this in the past. Sharon Bowles MEP and Antolin Sanchez Presedo underlined the relevance of full country-by county reporting at the roundtable. Sven Giegold MEP, who also co-sponsored the round table, has stated “The EU should consider showing leadership by implementing full country-by-country disclosure as suggested in this report this would help identify the abusive corporate practices that cost developing countries and European citizens billions each year”.

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